Ethylene prices continue to rise in Asia despite falling crude oil prices amid tightening supply-demand balance

16-Dec-15

Prices of ethylene are rising in Asia despite falling crude oil prices. The reason is a tightening supply-demand balance due to robust demand for petrochemical products in the region, as per asia.nikkei.com. "With raw material prices declining because of lower oil prices, and ethylene prices going up, our profit margins are widening more than we initially expected," said an executive at a major Japanese chemical manufacturer. As of mid-December, the spot price for ethylene was around US$1070/ton, or about 29% higher than its recent low, set in early September. Partly behind the increase was a problem at ethylene production facilities in Singapore, which has squeezed the supply. The price rose to around US$1400 this summer, due to decreased supply resulting from problems at production facilities in Japan and elsewhere. However, prices dropped sharply due to growing concerns over China's economic slowdown, hitting a near six-year low in September. Demand for ethylene later recovered due to the widespread view that "the effects of the economic slowdown on demand for petrochemical products are limited," according to a Mitsui Chemicals official. Demand for use of the material in consumer goods remains solid. As ethylene prices climb, so too does Asian demand for naphtha, a raw material for ethylene. Naphtha is growing harder to come by, even though refineries in the Middle East and elsewhere have finished scheduled maintenance work and European imports continue to flood into Asia. "Although prices of propylene and butadiene -- byproducts of ethylene production -- are declining, we can still make enough profit from refining naphtha because ethylene prices are high," said a representative at a chemical maker. The price difference between ethylene and naphtha has widened to about US$650 at present from around US$400 in late August. While that is smaller than the US$800 gap seen in the April-June quarter, it is still large. Nevertheless, "We can make enough profit at the current level," said an official at chemical manufacturer Showa Denko.